WHO’S NEXT?

Image courtesy of Desiree Duzich, PorchDrinking.com

At this point, it’s almost more surprising when a day goes by WITHOUT a craft brewery being sold or partially sold to a larger corporate entity. During the early days of Aleheads (ah, those halcyon days of 2010!), we lauded the craft beer industry for its robust independence and willingness to put the product above profit. But of course, that was before craft beer reached its tipping point and the bankers and CEOs in control of the global purse strings realized that there was gold in them thar hops.

There’s no ill will or bitterness from our end. Beer is a business, and a huge one at that. The craft segment of the industry has come into its own over the past decade and the writing was on the wall when Goose Island was snapped up by AB InBev 5 years ago. We railed against it at the time and warned our readers of the coming reckoning, but in the end, it was like fighting the tide.

In the past year we’ve “lost” three of our favorites: Founders, Ballast Point and Lagunitas. Aleheads darlings like Southern Tier, Uinta, Boulevard and Sweetwater have sold minority stakes to private equity firms. Perhaps most frightening, AB InBev quietly spun off a craft beer division called The High End which has now purchased 7 well-regarded craft outfits outright (Goose Island, Blue Point, 10 Barrel Brewing, Elysian, Golden Road, Four Peaks and Breckenridge). With InBev’s deep pockets, the acquisitions won’t be stopping any time soon.

In five years, the Aleheads have gotten older, wiser and FAR more cynical about craft beer. In 2010 we would have lambasted all of these breweries for getting into bed with Big Beer or Big Banks. But, as is often the case in America, you can’t fight corporations. The entire system is set up to benefit them and almost every industry that shows even an inkling of staying power or profit creation will eventually be chewed up and spit out by monied interests. Private equity companies with zero experience in the brewing industry are getting into the game because they see dollar signs. And aging brewery founders without good succession plans are cashing out while they’re young enough to enjoy the fruits of their labor.

It’s beyond sad that one of the BEST end games for a small brewery is to be bought up by AB InBev or MillerCoors because, hey, at least those guys technically brew beer (or whatever you call that jaundiced, piss-smelling water that flows out of a Miller or Bud Light tap)! Most of these stories follow the same pattern. AB InBev gets a call from a small craft outfit looking for some investment help and before you know it, the brewery has been sold outright and the owner/founder promises that nothing will change about the beer or brewery.

Of course, that’s horseshit. Even if AB InBev (or MillerCoors, or Constellation, or Heineken, or “fill in the name of a private equity firm”) doesn’t drastically alter the brewery in the present, the future of the company will CLEARLY look different than it would have if the craft brewery had remained independent. The beauty of the craft beer industry was that these small companies followed the lead of their visionary, oft-quirky founders and employees. Even if the recipes and offerings aren’t changed immediately, the “sell-out” companies are now following the lead of dispassionate bankers who live in different time zones or huge, multi-national brewing outfits that care far more about the bottom line than brewing innovative beer.

Many folks will argue that if the beer remains the same (and in almost every case, it has), what difference does it make? Beer is a commodity and if the quality and offerings haven’t changed, why shouldn’t we keep buying Ballast Point or Founders or Breckenridge or 10 Barrel Brewing? It’s a valid argument, but you probably know how the Aleheads (mostly) feel about it. When you support breweries owned and operated by banks or macrobreweries, you’re not really supporting the craft beer industry. Yes, the brewery in question may still employ the same people. And yes, those employees are getting at least a portion of your hard-earned dollars. But when a brewery is bought up by a larger corporation (or even partially owned by a corporation), a good chunk of your money is flowing away from the brewery and into the pockets of Big Beer execs or bankers. That doesn’t hurt anybody, but it certainly doesn’t help craft beer. Remember, the industry is made up of thousands of breweries, not just the small handful lucky enough to align themselves with massive outside investors.

Those companies that have been snapped up by AB InBev, MillerCoors or a variety of banks and other huge, international breweries now have the resources to muscle out the small-timers. You can claim that this is how capitalism works, but should it work this way? Ideally, the nearly 4,000 breweries in the US would compete with one another based on the quality of their products…not based on which one was lucky enough to sell out to AB InBev first. If 10 Barrel Brewing pushes other, worthy Oregon-based breweries off the shelves because AB InBev has infinitely greater resources than the small craft breweries, is that right?

Aleheads can’t change the industry, much as we’d like to. Who are we to tell an aging brewer that he or she shouldn’t sell their company for millions of dollars? It’s their business…they can shutter it, sell it, or light it on fire if they want to.*

*OK, technically they can’t do the latter.

I fully understand the claims of someone like Tony Magee that aligning Lagunitas with Heineken gives him the opportunity to grow his company in a way that he couldn’t have had he remained independent. I’m not faulting him for this decision if he thinks it’s what’s best for his company. But Magee can make that decision because all he cares about is Lagunitas (and rightly so). As craft beer bloggers obsessed not with one particular brewery but the industry as a whole, the interests of the Aleheads are vastly different. We may not fault Magee or other CEOs for selling their companies, but we certainly don’t have to support their decisions.

I have made this speech hundreds of times and will continue to do so because it’s important and because at this point it could serve as something of a mission statement here at Aleheads. If you care, and I mean truly, deeply care about the “idea” of craft beer as something more than just a collection of salable entities that happen to make beer, then perhaps you agree with us. Most people don’t. Most people don’t have the time or energy to waste on researching who is “really” making their beer…and that’s OK. I don’t roll my eyes at someone for drinking a Lagunitas or Four Peaks beer any more than I roll my eyes at someone for eating at McDonalds, watching the latest Transformers movie, or wearing an Apple Watch. Each of us has things and industries we care about more than others.

Me? I care about craft beer. And since I have a small, insignificant soapbox from which I can shrilly pontificate, I choose to do so. Be mindful of who makes your beer. The industry is better served by remaining independent and in the hands and control of those who actually make the beer. Money corrupts. Money influences. Yes, you need to make enough to keep your business going and growing, but when the millionaires and billionaires get involved, they and the sellers benefit…not us.

So…who’s next? Who will be The High End’s latest acquisition? Who will spurn them? Who will fall sway to the siren song of an immediate cash influx? And who will align themselves with organic, industry-empowering growth? As consumers, we have the means to influence these decisions. We just have to choose to care.

Know your beer and who makes it. Know your breweries and who owns them. The future of craft depends on it.

Technically any brewery that is more than 25% “owned or controlled by an alcoholic beverage industry member that is not itself a craft brewer” can’t be considered a craft brewery. At least, that’s according to the Brewer’s Association…the industry “watchdog” that, for better or worse, has set the parameters for what constitutes a “craft brewery” in America.

So, based strictly on that definition, Founders is no longer a craft brewery. But as you noted, their situation is somewhat unique and is certainly not in the same category as something like Blue Point or Breckenridge. That’s why I put the word “lost” in quotation marks in regards to Lagunitas and Founders. They sold a portion of their companies to overseas brewers and they just happened to exceed the Brewer’s Association’s somewhat arbitrary threshold. Whether or not you consider that “selling out” or problematic for the craft brewing industry is entirely up to you.

My goal is just to keep people informed about what’s going on with craft beer right now. You’re right that there is massive variety in how different breweries are expanding. Some are selling small investment stakes to private equity firms. Others are selling their companies lock, stock and (charred oak) barrel to macrobreweries. For some beer snobs, any whiff of outside investment is troubling. For others, all that matters is the quality of the beer. Drawing lines in the sand is difficult in such a complex, constantly shifting industry. The best we can do as consumers is to stay informed and support the companies that A) Make products we like and B) Align themselves with our own personal core beliefs.

I have stated many, many times that I find some of the business practices of AB InBev and MillerCoors abhorrent. They constantly push misogynistic, bro-tastic advertising and, in the past, have fought legislation that was pro-craft in various states. As such, I believe those two companies are “bad” for the craft beer industry and I tend to steer clear of any breweries that are aligned with them. That includes any company that is wholly or partially owned by The High End or Tenth and Blake, AB InBev and MillerCoors respective craft beer divisions.

Founders sold a 30% stake in their company to Mahou San Miguel in order to, as you note, access their international distribution network. I assume this is not an issue for most Aleheads and I myself still purchase Founders products. But having 30% of their company owned by a Spanish brewing behemoth does put Founders on very different footing from small, local, truly independent craft outfits. That needs to be something that craft drinkers are aware of so they can make their own, informed decision about whether to support the brewery or not.

I appreciate you pointing this out and you are correct that it should have been made more clear in the article.

Math Threshold Shift – Although corporate breweries have lost more marketshare in the past 5 years than craft breweries can produce by a factor of >2, economics articles just can’t generate the clicks like good ol’ fear and cynicism can.

I don’t think the craft beer bubble has burst economically. Obviously it’s still a VERY healthy industry or else the investors wouldn’t be flocking to get in on the IPA game.

But I DO think the bubble has burst “spiritually”. For years craft beer seemed like more of a “movement” defined by independent, quirky founders who collaborated, shared ideas, and didn’t mind being small and local. As the industry has gained mainstream recognition, breweries have gotten huge and investors both domestic and international have put skin in the game. It’s a wholly different industry now. Truth be told, it’s better for us beer drinkers. There’s more variety, more innovation, and bigger and better distribution.

I’m not advocating a return to the “Keep Craft Weird” days of a decade ago. But I do think all beer drinkers should be careful and informed about which breweries they choose to support. There are huge breweries that are good industry citizens and tiny breweries that are part of the InBev machine.

And for what it’s worth, craft beer can ALWAYS be hoppier. I’m still waiting for a beer that makes my head implode with bitterness.

Let’s not forget that these big, bad and mean corporations employ many Americans, donate to great causes & sponsor events that we all enjoy. Let’s take away all of these “Pig” corporate types….I’m sure the smaller, cooler “Local” fella will step right up.

Ah…glad we found our token Jeb! Bush supporter. I’m guessing you still have a Romney/Ryan bumper sticker on the back of your Buick?

It’s rare to see someone defending faceless, corrupt, multi-national corporations over small, local breweries. Kudos to you, NorMI! And your claim about corporations donating to great causes. Priceless!

For what it’s worth, AB InBev is a Belgo-Brazilian company. MolsonCoors is Canadian. SABMiller is Anglo-South African. Heineken is Dutch. Mahou San Miguel is Spanish. Of all the macrobreweries that have purchased or invested in craft breweries of late, only Constellation (makers of fine beers like Corona, Negro Modela and Pacifico) is an American company.

Wow Barley McHops, you’re so informed on the ownership of the Big Bad Breweries-tell me something I don’t know. Just because ownership is not on US soil doesn’t mean they are not employing a great deal of Americans (many more than the Craft/Micro sector). And yes, their contributions to groups and causes are priceless. Groups such as Here’s to Hero’s, Habitat for Humanity and many others would welcome the Micro’s donated time and/or funds, just as they receive from the Macro’s. BTW, I have worked in the wholesale tier, Brewery tier-Macro and currently in the Craft/Micro area of the beer industry-I’m not against craft/micro, I’m against idiots with no knowledge about the beer industry who just talk and never listen and learn the whole story.

NorMi, I think you are having a hard time separating the businesses and commodity of beer from the community that formed around craft beer over the last couple decades. The massive consolidation coupled with the rise of the uber coveted brewery only release that is resold at 20x the price, has left a bad taste in the mouths of those who us who enjoyed coming together and celebrating good beer, the people who made them and the people who enjoy them. I don’t think corporations are inherently evil, I just don’t think corporate intrests align with fostering community. As for your argument that the big guys do a lot of good and employ a lot a people my gut tells me litter for litter, craft employs more and gives back more. Just my 2ç

Nothing new here. Some “big” beers will remain really good, some will be crap. IMO, Ballast point had already jumped the shark, months before their sale to constellation. THey took a neighborhood brewpub, did a $25M expansion with borrowed money to get their products on the shelf across the country, and that was that…billion dollar valuation. Lagunitas, OTOH, is still minding their quality and it seems like nothing has changed.
Disclaimer: I live in Marin, am friends with several Lago employees, and get free swag for racing bikes in their jerseys. The key diff between Lago and B.Pt.: quality control. Lagunitas’ deal with Heineken was a strategic partnership, not a buyout. Lagunitas maintains all control of the recipes, brewing process, and QC. The Ballast Pt deal was a straight up sell-out…and as a result, the beer pretty much sucks now.
Getting into bed with big money is not necessarily the end of your brand, and it might just let your culture of quality trickle UP into the parent org.

Excellent essay. Thank you. “[T]he beer remains the same.” I agree. Blue Moon beer remains very good and has been under the umbrella of Coors since 1995. Similarly, Peets coffee remains excellent even after being placed under Starbucks in 2012. I guess the rule is that if a small craftsman wants to increase his products, then he will need a bigger workshop in a corporation.

I will say I was bummed with John McDonald sold to Duvel in 2014 because I support my local breweries. However I’ve since gotten real about their purchase and researched how Duvel handled Ommegang in NY. As it turns out Ommegang has still been able to do the good work of producing special types and had not gone completely commercial. In a talk recently that I attended with John McDonald, he divulged that he reinvested some of his gains from the BLVD sale back into Duvel and now sits on it’s board so he gave up control, but still has his thumb on the scale so to speak when it comes to BLVD. If you’ve seen anything that’s come out from BLVD in the last year, they are still doing LOTS of smokestack and seasonal brews and Duvel is letting BLVD do what BLVD does best. Be Kansas City’s beer, be creative and expand, even into Belgium. Is it still craft brewing when BLVD products are getting produced in Duvel’s brewery in Belgium for distribution in Europe? Perhaps not, but when BLVD brewers are going there to make sure it’s getting done right, it gives me hope for my brand for years to come.